Adjusting the CO2 cap to subsidised RES generation: Can CO2 prices be decoupled from renewable policy?

Jörn C. Richstein, Émile J.L. Chappin and Laurens J. de Vries

Applied Energy, 2015, vol. 156, issue C, 693-702

Abstract: The low prices in the European Emission Trading System (EU ETS) have triggered discussions of various possible reforms. One option is to decouple the CO2 prices from renewable energy policy by adjusting the emission cap to renewable energy investment overshoots. We introduce two ways of reducing the CO2 cap in response to overshoots of renewable policy investment over previously announced targets. We investigate these options with the agent-based model EMLab-generation. We find that both policy implementations are successful in restoring prices. They also ensure that making public investments that exceed policy targets contribute to carbon emission reduction, and that renewable policy does not benefit the most emission-intensive power plants. However, neither policy is suitable for achieving specifc levels of prices or price volatility.

Keywords: EU-ETS; Carbon market; Renewable policy; Dynamic cap adjustment; Agent-based modelling; Electricity market (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (28)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:appene:v:156:y:2015:i:c:p:693-702

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DOI: 10.1016/j.apenergy.2015.07.024

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